Issues
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the March 2021 issue.
This month we look at post-bankruptcy energy stocks. Companies that have emerged from bankruptcy are generally shunned by investors, as are energy stocks in general in the current market. Combined, these two traits offer some attractive investment opportunities. We discuss four of them.
We also look at tobacco stocks. Shares of these companies have fallen sharply in recent years due to an acceleration in the decline rate of cigarette volumes. However, that trend appears to be moderating, leaving the shares undervalued yet paying high dividend yields. Our feature recommendation, Altria Group (MO), is a stand-out value among the group.
We also include comments on recent price target and rating changes, including our recent Sell recommendations on Trinity Industries (TRN) and ViacomCBS (VIAC).
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
This month we look at post-bankruptcy energy stocks. Companies that have emerged from bankruptcy are generally shunned by investors, as are energy stocks in general in the current market. Combined, these two traits offer some attractive investment opportunities. We discuss four of them.
We also look at tobacco stocks. Shares of these companies have fallen sharply in recent years due to an acceleration in the decline rate of cigarette volumes. However, that trend appears to be moderating, leaving the shares undervalued yet paying high dividend yields. Our feature recommendation, Altria Group (MO), is a stand-out value among the group.
We also include comments on recent price target and rating changes, including our recent Sell recommendations on Trinity Industries (TRN) and ViacomCBS (VIAC).
Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
The timing is right for alternative energy.
Alternative energy (also referred to as clean or alternative energy) is by far the fastest growing energy source. The International Energy Agency (IEA) estimates that global renewable power supply will grow 50% in just the next 5 years.
While clean energy has been a story and knocking at the door for a while now, a certain critical mass in growth and development seems to be taking place recently. The market usually gets it. And it’s telling us something.
The iShares Global Clean Energy ETF (ICLN), which tracks 30 stocks in the Global Clean Energy Index, has taken off lately after going nowhere for more than a decade. ICLN soared 100% over the past year and 178% for the past two years, compared to S&P 500 returns of 22% and 44% respectively over the same period.
The market clearly sees big changes looming in the energy sector. It also helps that the Biden Administration will likely reward clean energy companies with more tax breaks and subsidies and other goodies. But more importantly, the focus will draw still more investor attention to the booming growth in alternative energy. And investor intrigue will only accelerate.
This month’s highlighted stock NextEra Energy (NEE) should clearly benefit going forward. It may not be the sexiest clean energy. But it provides a great way for more conservative, income oriented investors to play the trend.
Alternative energy (also referred to as clean or alternative energy) is by far the fastest growing energy source. The International Energy Agency (IEA) estimates that global renewable power supply will grow 50% in just the next 5 years.
While clean energy has been a story and knocking at the door for a while now, a certain critical mass in growth and development seems to be taking place recently. The market usually gets it. And it’s telling us something.
The iShares Global Clean Energy ETF (ICLN), which tracks 30 stocks in the Global Clean Energy Index, has taken off lately after going nowhere for more than a decade. ICLN soared 100% over the past year and 178% for the past two years, compared to S&P 500 returns of 22% and 44% respectively over the same period.
The market clearly sees big changes looming in the energy sector. It also helps that the Biden Administration will likely reward clean energy companies with more tax breaks and subsidies and other goodies. But more importantly, the focus will draw still more investor attention to the booming growth in alternative energy. And investor intrigue will only accelerate.
This month’s highlighted stock NextEra Energy (NEE) should clearly benefit going forward. It may not be the sexiest clean energy. But it provides a great way for more conservative, income oriented investors to play the trend.
Your Cabot Profit Booster portfolio closed out three more positions that were assigned at expiration last week. Those were Alcoa (AA) earning profits of $255 per contract for a yield of 13.8%; Kohl’s (KSS) earning profits of $400 per contract, or a yield of 11.1%; and Snap Inc. (SNAP) with $500 in profits earned for a yield of 10%.
The bull market is alive and well, and our holdings, in general, are delivering as expected, with the usual zigs and zags to keep us on our toes.
Today’s recommendation is a big solid technology company that should benefit for years from the ongoing 5G communications rollout—and it pays a nice dividend, too.
As for our current holdings, there are no changes. With the new addition, the portfolio is once again fully invested.
Details inside.
Today’s recommendation is a big solid technology company that should benefit for years from the ongoing 5G communications rollout—and it pays a nice dividend, too.
As for our current holdings, there are no changes. With the new addition, the portfolio is once again fully invested.
Details inside.
Current Market OutlookAfter a very strong rally from the late-January lows, the major indexes are again in the midst of a pullback—during the past week and a half we’ve seen a few days of churning and distribution as worries over inflation (and a less-loose Federal Reserve) cause some profit taking, and today saw a big rotation out of growth stocks. Could this be the start of a “real” correction? It could be, as the intermediate-term advance is long in the tooth and sentiment remains giddy. That said, we never anticipate, and so far, we really haven’t seen much abnormal action yet—while a few stocks have fallen apart after earnings, most leaders are intact and even the weakest major index (Nasdaq) is near its 25-day line, which is acceptable. Given some of the yellow flags out there, our antennae are up, but with most of the evidence still positive, we’re keeping our Market Monitor at a level 7.
This week’s list has many recent earnings winners, including a few that are busting loose from good-sized bases (regular or post-IPO). Our Top Pick is Wix.com (WIX), which has a great story, accelerating growth and just staged a very powerful breakout.
| Stock Name | Price | ||
|---|---|---|---|
| The AZEK Company (AZEK) | 47 | ||
| Deere & Company (DE) | 338 | ||
| DraftKings Inc. (DKNG) | 60 | ||
| Magna International Inc. (MGA) | 87 | ||
| Mohawk Industries (MHK) | 174 | ||
| MongoDB (MDB) | 392 | ||
| SelectQuote (SLQT) | 30 | ||
| Sonos (SONO) | 38 | ||
| Teck Resources Limited (TECK) | 23 | ||
| Wix.com (WIX) | 335 |
Here is your February Wall Street’s Best Digest issue 838.
Now that we have the presidential inauguration and former president’s impeachment behind us, let’s hope we can get onto the business of business for 2022! Almost 45 million in the U.S. have now been vaccinated against COVID-19, and we can almost see past the pandemic to a time when we can all get back to some semblance of ‘normality.’
Although, some of the trends that surfaced during the pandemic are sure to be with us for many years to come, including more remote workers, Zoom meetings, and home remodeling. Fortunately, for us, those trends should continue to make us money!
For now, the markets are holding up well; there are rumblings of an economic recovery on the way, and both investors and our investment pros remain bullish, as you’ll see in our Advisor Sentiment Barometer, as well as our Market Views.
This month, our Spotlight Stock is the largest commercial mortgage REIT, who managed to remain profitable during the pandemic. My Feature article further highlights that industry as well as some of the unique properties of the REIT.
We offer a host of Growth stocks this month, spread across the automobile, steel, infrastructure, marijuana, online dating, and airline industries. In Growth & Income, you’ll find opportunities in the music publishing, rental, retail, and homebuilding sectors.
Next, Financial stocks are finally beginning to gain ground, and here we include ideas from the insurance, investment, and commercial banking areas. Healthcare brings us two biotech stocks. And in technology—which is continuing to shine—our contributors like semiconductors, hardware, navigation tech, e-commerce, and telecom.
This month, while Utilities have not yet made their mark on 2021, we have one midwestern company that looks very interesting. We also offer you a couple of Low-Priced stocks to put some zing in your portfolio. And our REITs & Preferred Stocks section include companies from the commercial and data center sectors, as well as a preferred issue from an investment bank.
Lastly, our Funds & ETFs are well-diversified, with ideas in healthcare. Utilities, materials, yield, airlines, and small cap arenas.
I wish you a healthy and prosperous ‘rest of the winter’, and look forward to your feedback and questions. My address is nancy@financialfreedomfederation.com.
Happy Investing,
Nancy K. Zambell
Editor and Chief Analyst
Wall Street’s Best Digest
Now that we have the presidential inauguration and former president’s impeachment behind us, let’s hope we can get onto the business of business for 2022! Almost 45 million in the U.S. have now been vaccinated against COVID-19, and we can almost see past the pandemic to a time when we can all get back to some semblance of ‘normality.’
Although, some of the trends that surfaced during the pandemic are sure to be with us for many years to come, including more remote workers, Zoom meetings, and home remodeling. Fortunately, for us, those trends should continue to make us money!
For now, the markets are holding up well; there are rumblings of an economic recovery on the way, and both investors and our investment pros remain bullish, as you’ll see in our Advisor Sentiment Barometer, as well as our Market Views.
This month, our Spotlight Stock is the largest commercial mortgage REIT, who managed to remain profitable during the pandemic. My Feature article further highlights that industry as well as some of the unique properties of the REIT.
We offer a host of Growth stocks this month, spread across the automobile, steel, infrastructure, marijuana, online dating, and airline industries. In Growth & Income, you’ll find opportunities in the music publishing, rental, retail, and homebuilding sectors.
Next, Financial stocks are finally beginning to gain ground, and here we include ideas from the insurance, investment, and commercial banking areas. Healthcare brings us two biotech stocks. And in technology—which is continuing to shine—our contributors like semiconductors, hardware, navigation tech, e-commerce, and telecom.
This month, while Utilities have not yet made their mark on 2021, we have one midwestern company that looks very interesting. We also offer you a couple of Low-Priced stocks to put some zing in your portfolio. And our REITs & Preferred Stocks section include companies from the commercial and data center sectors, as well as a preferred issue from an investment bank.
Lastly, our Funds & ETFs are well-diversified, with ideas in healthcare. Utilities, materials, yield, airlines, and small cap arenas.
I wish you a healthy and prosperous ‘rest of the winter’, and look forward to your feedback and questions. My address is nancy@financialfreedomfederation.com.
Happy Investing,
Nancy K. Zambell
Editor and Chief Analyst
Wall Street’s Best Digest
Stocks seemed to wobble a bit this week and yesterday there was a mild sell-off among some tech stocks. Still, of the 400 S&P 500 companies that have already reported earnings, 80% had beaten analysts’ expectations, according to FactSet. Overall, the Explorer portfolio has performed relatively well with Fisker (FSR) up 17% and Virgin Galactic (SPCE) doubling since the beginning of 2021. This week’s new recommendation is from a sector in an uptrend due to a combination of higher demand and tight supply.
In February’s Issue of Cabot Early Opportunities we dig into the red hot IPO market.
We take a closer look at five recent IPOs that have been on my shopping list. It is not an Issue for the faint of heart. Several of these stocks have made significant moves in their short history as public companies.
There are strategies to mitigate the risks, however. And as we scan the universe of attractive stories today it is not hard to envision several of these stocks trading significantly higher a year from now.
Sit back and enjoy.
We take a closer look at five recent IPOs that have been on my shopping list. It is not an Issue for the faint of heart. Several of these stocks have made significant moves in their short history as public companies.
There are strategies to mitigate the risks, however. And as we scan the universe of attractive stories today it is not hard to envision several of these stocks trading significantly higher a year from now.
Sit back and enjoy.
The stock market added to its gains last week up for a second straight week with the S&P 500 up 1.2% while the Nasdaq jumped 1.7%. Of note, February expiration is upon us this week. And all three of our February positions (Alcoa, Kohl’s and Snap) are in great shape, and likely to expire for full profits. But rest assured I will send you a full breakdown of these positions on Friday morning prior to expiration.
Current Market OutlookWith the major indices in record territory and the leading growth stocks showing strength, it’s hard to be anything less than bullish right now. Even at these elevated levels, the market has provided us with a few attractive entry points recently. But with earnings season well underway and sentiment still elevated, the potential for near-term volatility has increased. Thus, it’s imperative not to throw caution to the wind in this news-sensitive environment. Given the weight of evidence, being selective when buying is the preferred tactic. The dominant intermediate-term trend is clearly up, though, so you don’t want to be too defensive. We’ll keep our Market Monitor at 7 and see how things go from here.
This week’s list has a nice mix of stocks across several industries benefiting from different trends. Our Top Pick this week is CarParts.com (PRTS), which recently had a high-volume breakout from a huge basing pattern.
| Stock Name | Price | ||
|---|---|---|---|
| Agilent Technologies (A) | 128 | ||
| Analog Devices (ADI) | 160 | ||
| CarParts.com (PRTS) | 21 | ||
| Chegg (CHGG) | 112 | ||
| eXp World Holdings (EXPI) | 80 | ||
| Freeport-McMoRan Inc. (FCX) | 33 | ||
| Johnson Controls International plc (JCI) | 53 | ||
| Pinterest (PINS) | 89 | ||
| Square, Inc. (SQ) | 276 | ||
| Twitter (TWTR) | 74 |
Updates
Now that the stock market correction finally arrived, I want to sketch out what investors can expect in the near future.
What a difference a week makes. Last Friday, it seemed the market was in a death spiral and it was hard to make sense out of the volatility. This week has been downright placid, and all the major indexes are up nicely. Since last week’s update, the S&P 600 Small Cap Index is up by 5%.
The iShares EM Fund (EEM) gapped up to top its 25- and 50-day moving averages, which returns the Emerging Markets Timer to a positive reading. We are returning our half positions in two stocks and our full position in one stock to Buy ratings and initiating a new position.
I introduce a new stock to the prudent portfolio and am selling two stocks.
The 10-year yield has been quiet ahead of the announcement, trading sideways since Monday morning. That’s given utilities a bit of a reprieve, at least in the short term.
Now that the stock market correction has finally arrived, this weekly update is going to be a little bit different than normal. I’m not going to bother researching and reporting changes in earnings estimates, unless a company (a) just reported quarterly results within recent days and (b) the quarterly results significantly changed the future EPS projections.
Trim your sails. The market’s recent slide has cracked the intermediate-term uptrend, and while the overall bull market is still intact, chances are the market is going to need some time to correct and consolidate going forward.
For investors lulled into a false sense of security by the low-volatility bull market of 2017, the past week has been a rude awakening. Even for investors who remember much longer and much deeper market corrections (and us professionals!) Monday’s sudden drop was a little scary.
The iShares EM Fund (EEM) is still well on top of its moving averages, which keeps the Emerging Markets Timer firmly positive.
Crista gives an update on the Section 232 investigation into the steel industry and describes what a normal stock market correction look like and how you should handle it. One rating change.
Alerts
This connected device company is expected to grow by 39.4% next year.
One of our portfolio stocks reported strong second-quarter (2Q) results this morning, benefiting from higher fares and fuller planes.
Three analysts have raised the EPS estimates of this medical device company in the last 30 days.
The marijuana sector’s charts have been weak overall since the sector’s March top.
This sleep-focused company has risen nicely and is getting near sell territory.
The following four brokerages have recently maintained their ‘Buy’ ratings on this tech stock: B. Riley, Nomura, and Stifel Nicolaus. As well, Raymond James upgraded the shares to ‘Outperform’.
The shares of this fitness center company were just added to the Russell 1000 index.
The shares of this semiconductor stock were just initiated at Wedbush with an ‘Outperform’ rating.
The top three sectors in this fund are: Technology (45.76% of assets), Industrial (40.52%), and Healthcare (12.33%)
Here are the latest rating changes on this tech stock.
In the past 30 days, 22 analysts have increased their EPS estimates for this beauty retailer.
This tech stock beat analysts’ earnings estimates by $0.04 last quarter, and the company is expected to grow at a 33.2% annual rate over the next five years.
Portfolios
Strategy
A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.
A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.
Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.
Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.
Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.